In his opening remarks, Minister for Finance, Paschal Donohoe said that budget 2020 was ‘developed in the shadow of Brexit.’ The budget he went on to deliver had very few surprises. In fact, the contents of this year’s budget were well flagged in advance and the pragmatic approach was very much in line with the unassuming and prudent politician we know Paschal Donahoe to be.
In total the entire budget package was €2.9 billion, but a total of €1.2 billion of that has been set aside in the event of a no-deal Brexit. In his speech, the minister outlined where exactly this money would be going. €650 million is put towards agriculture, enterprise and tourism. This money is supposed to help some of the most affected sectors of the Irish economy. In the expectation of future job losses in the event of a no-deal, €365 million is set aside for an increase in social welfare payments and a fund of €45 million is set up to help transition people into new employment. Clearly, Brexit and the expectation of a no-deal looms large over this budget. The threat it could cause this country has allowed the current government to stay in power and rein in spending in this budget.
Climate action was another important feature of budget 2020, but did it go far enough? The expected increase in the carbon tax was announced, bringing it up €6 to €26 per tonne. This increase is expected to raise €90 million for the government in 2020, with further increases planned to bring the tax to €80 per tonne by 2030. Taoiseach Leo Varadkar said that the money raised from the tax would be ring-fenced for future climate action. In his speech to the UN general assembly last month he said the fund that will be established will provide ‘billions to make change possible.’ Also included in the budget, there was €8 million for grants to encourage people to buy electric vehicles, €13 million for energy efficiency upgrades to households at risk of energy poverty and €5 million for peatland rehabilitation. Despite the measures, Green party leader Eamon Ryan said the budget ‘won’t move the dial on climate breakdown.’
As usual, health and education are a big part of the country’s annual budget. The minister announced a total increase of €1 billion in health spending. The main announcement was the establishment of free GP care for children under 8 and free dental care for children under 6. Also, €25 million is being invested in an attempt to reduce waiting lists. In education, funding is being provided for 150 new teaching posts and a large investment in special education was announced with 400 additional special needs teachers and 1,000 additional special needs assistants.
Leo Varadkar’s planned tax cuts were sacrificed in this budget and only a few tax measures were announced. This includes increasing the home carer and self-employed tax credits and the inheritance tax threshold. Paschal Donohoe said the government were ‘playing it safe’ by not introducing tax cuts this year. Instead, a more cautious approach was taken by the government. It has been a Fine Gael plan since the 2016 general election to merge the universal social charge (USC) and the pay-related social insurance (PRSI). However, with the threat of a no-deal Brexit, it was decided that the exchequer could not afford to lose such a big source of revenue. This comes after warnings from senior government and Revenue officials that such a move could amount to a €1 billion loss of government revenue.
Among other notable announcements in the budget were €1.1 billion to build 11,000 social homes in 2020, €10 million in funding for new and existing direct provision centres and a 50c increase on a packet of 20 cigarettes. For higher education, there has been a €74 million increase in funding in areas like research, apprenticeships and upskilling. This is in addition to a €60 million funding of the Human Capital Initiative which aims to facilitate the learning of innovation and technological skills in response to changing employment needs.
As expected, opposition parties criticised the budget and condemned the government’s approach to key issues. Sinn Féin’s finance spokesperson Pearse Doherty said it had ‘failed to ease pressure on working families,’ while labour leader Brendan Howlin described it as a ‘do nothing’ budget. With the confidence and supply agreement in place, Fianna Fáil has kept quiet. Micheál Martin claimed their stance was ‘not an endorsement,’ however, he also said that his party has been an active member of budget negotiations and will vote it through the Dáil. Fine Gael will be hoping the prudent nature of the budget will restore some of the public’s confidence in the party as one of good fiscal management. There has been a clear winner in the budget regarding the tension between the pressures on the government to announce extravagant and popular spending proposals and the realities facing the country’s economy.
Conor Paterson – Politics Editor